May 26, 2015

Supreme Court Decides Kellogg Brown & Root Services Inc., et al.

On May 26, 2015, the U.S. Supreme Court decided Kellogg Brown & Root Services, Inc,. et al., No. 12-1497, holding that the Wartime Suspension of Limitations Act (WSLA) does not apply to civil claims brought under the False Claims Act (FCA) and that the FCA’s “first-to-file” rule does not apply in perpetuity.

A water purification operator brought a qui tam complaint against a contractor alleging that the contractor had fraudulently billed the Government during the Iraq war for water purification services that were not performed properly. Shortly before the case went to trial, the Government informed the parties of an earlier-filed pending case (Thorpe) with arguably similar claims. The District Court dismissed the operator’s claim without prejudice, concluding that the claim was barred under the False Claims Act’s first-to-file bar, which precludes a qui tam suit “based on facts underlying [a] pending action.” 31 U.S.C. § 3730(b)(5).

While the operator’s appeal of that dismissal was pending, Thorpe was dismissed for failure to prosecute. The operator then filed a new complaint making the same claims, but the District Court also dismissed the second complaint under the first-to-file rule because the operator’s first case was still pending on appeal. The operator voluntarily dismissed the appeal and filed a third complaint. The contractor moved to dismiss the operator’s third complaint under the first-to-file rule because two other allegedly related cases had been filed between the operator’s filing of its first and third suits. The court found the operator’s latest suit barred under the first-to-file rule and also determined that all but one of the operator’s claims were untimely because they were filed more than six years after the alleged wrongdoing. The Fourth Circuit reversed, concluding that the operator’s claims were not time barred because the statute of limitations was tolled by the WSLA, which suspends the statute of limitations for “any offense” involving fraud against the Federal Government. 18 U. S. C. §3287. The Fourth Circuit also concluded that the first-to-file bar is no longer applicable in qui tam actions once a related action is dismissed. Because two intervening cases had been dismissed at the time of the Fourth Circuit’s decision, the operator had the right to refile his case.

The Supreme Court affirmed in part and reversed in part. The Court first concluded that the WSLA did not suspend the operator’s statute of limitations because the WSLA applies only to criminal actions, not to civil claims like those asserted by the operator. The Court based its conclusion on the statute’s use of the term “offense,” on the statute’s placement in Chapter 18 of the Code (the criminal law chapter), and on the statute’s history. Because the parties agreed that the operator had raised arguments that, if successful, could render at least one claim timely on remand, the Court also considered whether the operator’s claims should be dismissed with prejudice under the first-to-file rule. It concluded that a qui tam action under the FCA “ceases to be ‘pending’ once it is dismissed.” Because both intervening cases had been dismissed, they were no longer “pending,” and the dismissal of the operator’s claim based on the first-to-file rule had been in error.      

Justice Alito delivered the decision for a unanimous Court.

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